PepsiCo splits leadership roles for US snacks and beverages

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Dive Brief:

PepsiCo will split the leadership roles at ​PepsiCo North America, the company said in a statement. Vivek Sankaran will become CEO of Frito-Lay North America and Kirk Tanner will oversee North America Beverages as its top executive.

Sankaran and Tanner will replaceAl Carey who is CEO of PepsiCo North America. Carey will retire at the end of March following nearly four decades at PepsiCo, including three in his current role.

The executive changes come two months after Ramon Laguarta, a 22-year company veteran, took over as CEO. He replaced Indra Nooyi, who stepped down after 12 years leading the food and beverage company.

Dive Insight:

The latest leadership shakeup caps a busy year for the soda and snacks giant. It's potentially been a year that could signify a change in direction for the New York company. After all, Nooyi left the company after more than a decade in the top post.

In recent years, PepsiCo has been a tale of two companies. Its Frito-Lay division has posted strong growth as consumers snack more. Its push to bulk up its better-for-you offerings through acquisitions like Bare Foods, a maker of baked fruit and vegetable snacks, has paid off.

Meanwhile, its beverage division has largely floundered as consumers move away from sugary drinks and new launches like organic Gatorade failed to resonate with consumers. To reposition its drinks operations to better match consumer tastes, PepsiCo has purchased businesses like probiotics beverage marker KeVita. Just this month, it completed its $3.2 billion acquisition of sparkling water maker SodaStream.

By installing new management, it's possible that PepsiCo could be amenable to more sweeping options. Some on Wall Street believe the company could improve its bottom line by selling off Quaker Foods North America or by refranchising PepsiCo's bottling operations, which Coca-Coca has recently done.

It's also possible the company could split its beverage and snacks divisions, a move long championed by activist investor Nelson Peltz. PepsiCo may be hinting that it's more willing to consider this option by separating the executive roles for U.S. snacks and drinks.

On the other hand, Laguarta and other top executives may view a split as a way to allow Sankaran and Tanner to devote all their attention to their respective operations, rather than being distracted by another division impacted by different market dynamics.

Bonnie Herzog, an analyst at Wells Fargo, wondered after the appointment of Laguarta in Augustwhether new leadership at PepsiCo could consider a different set of strategic options for the food and beverage giant. "We think the answer could be yes — and that this transition could open a wider door to PEP considering a variety of potential alternatives, including stepped up refranchising ... or even potentially splitting up the company," she said.

PepsiCo has a roster of well-known brands, from its namesake beverage to Gatorade, Mountain Dew, Tropicana, Tostitos, Aquafina and Doritos. While it remains a top beverage competitor with rival Coca-Cola and its snacks are synonymous with school lunches and parties, PepsiCo may need to consider a more drastic overhaul as consumers snack more and gravitate away from sugary drinks in favor of tea, water and coffee.

With a new CEO at the helm, and the eventual split in the executive roles for its U.S. operations, these c-suite changes could bring with them a new way of thinking for the 120-year old company.